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Identify two possible effects of this change in the interest rate on Paul's business - Edexcel - GCSE Business - Question 4 - 2015 - Paper 1
Question 4
Identify two possible effects of this change in the interest rate on Paul's business. Select two answers: A Greater competition from rivals B Increased variable ... show full transcript
Worked Solution & Example Answer:Identify two possible effects of this change in the interest rate on Paul's business - Edexcel - GCSE Business - Question 4 - 2015 - Paper 1
Step 1
Select two answers:
Answer
The two possible effects of a change in the interest rate on Paul's business can be identified as:
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C Lower sales: An increase in interest rates often leads to higher borrowing costs, resulting in less consumer spending. If customers are paying more in interest on their loans or credit, they may reduce their spending on non-essential goods and services, leading to lower sales for businesses.
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D Higher loan repayments: When the interest rates rise, the cost of existing and new loans also increases. Paul may face higher monthly repayments on any loans taken for business expansion or operations, which can affect the cash flow and profitability of the business.